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Transportation Trends: The Pros and Cons of Running a Private Fleet

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Here are the pros and cons of investing in a fleet of vehicles and hiring operators to drive them, versus relying on third parties to manage your freight, logistics, and transportation.

The trucking capacity crunch, the driver shortage, and the ever-increasing costs of transporting goods via a third party are all pushing more shippers to consider the private fleet route. The uptick in e-commerce and the demands that come along with it—faster delivery times, smaller orders, higher-velocity fulfillment operations, etc.—are also driving companies to consider what it would be like if they had their own fleet of delivery vehicles and a driver pool to choose from for some or all of their deliveries.

So, rather than depending on a carrier to move their freight, companies invest in vehicles, drivers, and everything else needed to run a dedicated fleet. In return, they gain complete control of their transportation operations, always knowing that capacity is available, and have 100% visibility over those operations (versus depending on a third party to supply that information to them). If these benefits sound compelling, be sure to consider these five realities of private fleet ownership before investing in your own:

1) Current market trends are complicating transportation and making it more expensive. In The rise of private fleets (and dedicated operations), Gary Frantz discusses how the robust national economy is driving record freight levels right now, and how the driver shortage is only adding to shippers' pain points. Throw increasingly challenging city congestion and highway driving conditions and rising operating and equipment costs into the mix, and "you have a perfect storm impacting available capacity—and generating more and more interest in private and dedicated fleets."

2) Private fleets cost money, but they can also pay off by reducing transportation costs over the long term. Although capacity considerations may be the driving force behind fleet launches, customer service and cost play into it as well. "For private fleets, transportation is integral to the overall view of product quality and satisfaction," National Private Truck Council's Gary Petty said. "They're indistinguishable. And as shipping costs with for-hire carriers have skyrocketed in the past year, more and more, it's also about cost management." If you're new to private fleet ownership, it's essential to understand that the vehicles themselves won't be your only expense. You'll also need qualified employees to drive them (i.e., those who hold CDL licenses or who can get them), insurance coverage for your fleet, a good preventative maintenance plan, and a place to store them when they're not on the road.

3) Your drivers will get a better work-life balance. This is "highly desired by drivers," according to Frantz. "They're able to get home to their families on a more regular basis, which contributes to a better work-life balance. They also tend to stay with their employers longer. According to the NPTC, the private fleet driver-turnover rate is about 14% annually, whereas the driver-turnover rate for commercial over-the-road truckload carriers was 94%. "The average tenure of a private fleet driver is 10 years," Frantz reports, noting that private fleet drivers are also generally three times safer than commercial industry drivers as a whole.

4) But private fleets aren't immune to driver shortages. With U.S. unemployment rates at 50-year lows, finding truck drivers is difficult for any employer. Like most trucking companies these days, private fleets are facing driver shortages despite the fact that most private fleet drivers stay with their company longer than for-hire carriers, according to FleetOwner. For all transportation companies, drivers are the No. 1 challenge, the publication reports, but "private fleets are uniquely stable and dependable long-term compared to the rest of the industry."

5) You may not need as much capacity as you thought you did. If your company has historically relied on outside trucking firms to manage its freight, you may not have a perfect handle on exactly how much capacity you actually need throughout a year. This risk of equipment underutilization can get pricey. "Many companies experience shipping peaks and valleys throughout the year," Canada Cartage points out. "Because of this, private fleets often scale their equipment needs to handle peak periods and satisfy customer demands, which can lead to underutilized equipment sitting idle during slower periods. This practice is inefficient and extremely costly for companies." One way around this is by selling that additional capacity to other companies that need transportation support—a move the can help generate additional revenues to cover the costs of running your private fleet.

If this is the year that you plan to launch a new, private fleet or take an existing fleet to the next level, keep these critical points in mind as you make your purchase decisions. Weigh out the pros and the cons, and compare them to the positive and negative aspects of relying on outside trucking companies.

Rafael Granato
By Rafael Granato
on Jun 18, 2019 9:56:57 AM
   
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